Sugar cane is used to produce bioethanol, which Lula da Silva and George Bush are keen to promote. Photograph: Paulo Whitaker/Reuters

The roar of large truck engines is drowned out by the thunderous sound of giant crushing machines and a piercing hiss from steam generators at a sugar-processing plant near the Brazilian city of Sertãozinho.

The 32-wheeled lorries and trailers - each with 60 tonnes of long, blackened stems of sugar cane protruding from their open tops - drive into position in quick succession for their loads to be hoisted out by giant grabs.

Some 500 lorries deliver their loads each day to be turned into sweetener for Coca-Cola, ethanol for Esso and bagasse, a waste product that drives the steam generators here - and increasingly for the local national electricity grid.

This ethanol has been serving the Brazilian transport sector for the past three decades without attracting much international interest or comment. That suddenly changed when the west saw biofuels as a source of energy security and clean power but the soaring cost of food and fears of deforestation have triggered a global debate on whether ethanol will cure or kill the planet.

Anselmo Lopes Rodrigues, chief executive of Santelisa Vale, which owns the sugar mill outside Sertãozinho, perhaps unsurprisingly is convinced of the big new future for ethanol. "We have a very large expansion plan," he says. "In the next few years we must be very close to oil companies."

That process has already started. In April, an associated business of Santelisa announced it had formed a 50-50 joint venture with BP in a deal worth as much as $1bn (£500m). The following day, Santelisa's main rival bought Exxon Mobil's network of filling stations in Brazil.

Goldman Sachs, the US investment bank, has recently bought a 16% stake in Santelisa and there is talk of a stockmarket listing - not only in São Paulo but also in New York.

The sugar cane industry has a long history: Portuguese colonialists started to grow the crop in 1525 and 6 million slaves were shipped over from Africa to do the cutting. The Brazilians have been using sugar-based alcohol to fuel cars since the 1920s although the industry really got off the ground in the 1970s when the government sought relief from a first oil price shock.

With oil prices close to $140 a barrel, Brazil thought its time in the economic sun had arrived, given its claims that using ethanol can cut carbon emissions by 90% on a life-cycle analysis.

This encouraged Britain to mandate that 2.5% of all petrol and diesel should come from crop-based fuels and the EU is looking at similar moves. Sweden moved swiftly along this path and is a huge importer of Brazilian ethanol.

President George Bush talked of encouraging ethanol consumption in the US in a meeting with the Brazilian president, Lula da Silva. The US wants to raise its consumption from 5bn to 35bn gallons by 2017 through a mixture of its corn-based supplies and sugar-based imports from Brazil.

No sooner had the world started to buy into the benefits than the environmental and labour record of the ethanol sector were called into question. Swedish motorists have been threatening to forsake this cleaner fuel amid allegations that some sugar cutters in Brazil are paid rock-bottom wages, are under-age and die young from exhaustion.

To counter all this and stop a potential international industry being snuffed out at birth, the Brazilian Sugar Cane Industry Association (UNICA) has launched a counter-offensive with a brand new team of public relations and other professionals.

At its swanky tower block with panoramic views over São Paulo, UNICA president Marcos Jank reels off the list of initiatives that his 110 member companies are signing up to. One of the reforms will see half a million workers made redundant. For workers to cut the cane manually they have to burn off the leaves first, which causes CO2 pollution.

More serious allegations about the physical dangers and accident rates have been levelled by Amnesty International and others, who cite early deaths caused by exhaustion. The social security administration in Brazil says 312 workers in the sugar cane and ethanol plants died on the job between 2002 and 2005 and 83,000 suffered injuries, but UNICA says the industry's record is exemplary compared with other sectors in Brazil.

The industry also finds itself under fire in the food versus fuel debate. UNICA is adamant that even with ethanol output increasing by nearly a quarter in 2007 to a record 22bn litres and with further growth in the pipeline, the forested areas are safe.

Only 1% of the country's arable land is being used for growing sugar cane to supply the ethanol sector and even under its most ambitious expansion plans this figure would barely rise to 3%, says Jank, who dismisses claims that his industry is pushing itself or other agriculture into the Amazon.

"We don't believe that sugar cane needs to move to the Amazon. It will not happen," he argues. "Most of the [agricultural] expansion in the Amazon is not related to sugar cane production in the south."

But Mario Menezes, a campaigner with Friends of the Earth in Brazil, has no doubt that sugar cane production for ethanol is going on in the wider Amazon area and pushing other agriculture into the ultra-sensitive region.

His organisation, which has split with the parent body because it wanted to take part in round table discussions with the biofuels companies, is not opposed to sugar cane production taking place in the Amazon as long as there are strict controls.

He claims that 250,000 hectares (618,000 acres) of the Amazon are already being used for growing sugar cane and believes 350,000 head of cattle a year are moving into the "legal Amazon" as a result of being displaced by ethanol activity in the state of São Paulo alone.

You can buy 800 hectares of land in the Amazon for the price of one hectare in the ethanol belt of São Paulo state, according to Menezes, making it inevitable that cattle and soya producers are going to move northwards.

Menezes says sugar cane is displacing basic foodstuffs in the São Paulo area, forcing fruit and vegetables to be trucked in to local markets from outside. UNICA insists that Brazilian ethanol output is not contributing to increasing food costs, with Jank describing as "ridiculous" claims that biofuels are - as one politician described it - a crime against humanity. He points out that sugar prices have actually fallen in recent years.

Instead, he argues that subsidies for US farmers to grow corn and Europe's drive to plant rapeseed for biofuels represents part of the rising global cost of food that has caused riots in Haiti and other countries.

Meanwhile Brazil believes its 30 years of experience in ethanol production could be put to good use by the rest of the world.

More than 100 countries worldwide - many of them poor and facing high crude oil import bills - could adapt their own transport to run on biofuels as well as find a valuable foreign currency earner through exports, says UNICA.

Brazil's ethanol from sugar cane has been overtaken in production terms by US corn-based ethanol. Countries with cooler climates - such as Britain - are already preparing small-scale experiments to produce ethanol from sugar beet and possibly wheat.

But UNICA insists that sugar-based ethanol produces four times as much energy as beet and wheat while on a life-cycle basis cutting far more carbon out of the atmosphere than either of them when used as an alternative to petrol.

The arrival of the big corporations such as BP and Goldman Sachs suggests that ethanol from sugar cane is regarded as a potential moneyspinner and Friends of the Earth wants to know whether they will be a force for good or ill.